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As you learned from one of my recent articles, occupational fraud is a growing phenomenon in Canada. In fact, the Certified General Accountants Association (CGA) recently reported that one-quarter of all small- and medium-sized enterprises were victims of at least one instance of workplace fraud in 2011.

Not only that, the CGA reported that the recurrence of fraud is much more common than thought, with over one-fifth of small business owners reporting that fraud occurred four or more times during the 2011 business cycle.

As indicated by the Certified Fraud Examiners Association (CFEA) in its 2012 report, most occupational fraud goes undetected for at least 18 months and is more frequently discovered by a tip rather than through internal control systems.

And believe me, it isn't just small- and medium-sized businesses that suffer from fraudulent employee behaviour. For instance, many readers will remember the high-profile RCMP pension scandal where suspicious transactions were discovered and led to an inquiry. Many readers might also recall the government sponsorship scandal involving bid rigging and political interference in procurement practices, where over $100 million was awarded to one advertising agency for little or no work. This scandal led to the 2004 Gomery Commission of Inquiry and ultimately to new legislation to protect whistleblowers.

As you can imagine, it takes a courageous person to lay a complaint with their boss and/or employer agency to expose organizational corruption. And while these scandals are scary enough, the retaliation that tipsters and/or whistleblowers often experience is inexcusable, but unfortunately real.

For instance, some complainants involved in the scandals mentioned above were removed from their posts and given punitive transfers to other departments and/or lesser jobs. A health scientist and researcher, who suggested a drug she was testing might be a risk to the life of patients, was threatened with legal action and cancellation of funding. Another physician tipster was subjected to at least four complaints made to his professional body, all in an effort to muzzle him. Still other whistleblowers experience brazen intimidation and attacks on their personal character and credibility.

I've also seen and have helped individuals who demonstrated their courage of conviction by speaking up when they saw wrongdoing.

In one case, the employee was subjected to such severe and ongoing harassment that she became extremely stressed and couldn't cope. She had no alternative but to seek a leave of absence for stress.

I was then asked to intervene and was horrified by the documentation she submitted to me. I helped the employee to lay formal complaints with various government agencies that oversaw the operational standards at the employer location. It was only then that action was taken. While the investigation led to terminations and transfers, the original complainant was never able to return to the work that she had once loved. What a terrible shame.

So would you be surprised, then, if I told you that most people, in spite of the fact they see wrongdoing, will still not complain. What would you do? Most employees immediately become frightened for their job and perhaps even their career. Instead of complaining, they will look for a new job as quickly as they can. Those who stay usually attempt to ignore what's going on around them and/or they hold their breath and hope the problem will go away.

Unfortunately, and for some unknown reason, there's always also been a social stigma surrounding individuals who complain or "rat out" others, no matter who they are. Whistleblowers may be seen as tattletales, martyrs, snitches and/or accused of attention seeking. Yet, all of these real and insidious pressures on individuals keep many employees from reporting the wrongdoing they see and experience and the trauma drives them deep into distress.

However, the Gomery inquiry has helped the public to see that corruption and conflict of interest were more common than first thought and that whistleblowers were being inappropriately punished while attempting to protect the public good. This led to the creation of whistleblower or public disclosure legislation that was implemented in 2007. This legislation directs every chief executive officer in a government agency to establish procedures for managing disclosures by employees.

But what about the private and not-for-profit sectors? How are employees protected in these organizations? According to associate Prof. Alan Levy from Brandon University, an expert on the whistleblowing issue, employees in the private sector actually have no protection whatsoever when they report internal wrongdoing. In fact, in his research on the whistleblowing issue across the province, he has found only one organization that has an effective policy on whistleblowing. In addition, he reports a grave concern that there is absolutely no training for lawyers, nor any university courses, on whistleblowing law in Canada. This means that not only are people in power ill informed about Canadian legislation, but they often end up frustrating implementation of the law.

Finally, as can be expected, the typical employee in the public sector is still far from being aware of this legislation and even if they were, they continue to be fearful of retaliation. As a result, the law is not being effectively used.

With respect to the private sector, Levy also suggests that organizations are inconsistent in how they guide employee behaviour. For instance, on one hand, they do everything they can to develop employee loyalty and commitment while at the same time they expect the employees to report wrongdoing. And without written policies and procedures on reporting internal wrongdoing, either nothing is done or the employees are forced to get attention by going to the media.

In Levy's opinion, the poor record of whistleblowers successfully reporting wrongdoing is shameful for a democratic country like Canada. In his view, employees will simply not put their career at risk unless our legislation is upgraded to more effectively protect them.

In addition to creating proper policies and procedures to deal with whistleblowing, Levy suggests that education for both professionals and employees on whistleblower legislation is the key to its success.

However, in my view, organizations shouldn't have to wait for an external body to bring education to their door and/or for legislation to be strengthened. They should take the leadership and ensure that policies and procedures are put in place to not only protect their employees, but also protect organizational assets.

Source: Does Canada Have a Problem with Occupational Fraud? CGA-Canada Last Updated: May 23, 2012

Barbara J. Bowes, FCHRP, CMC, CCP, is president of Legacy Bowes Group and vice-president of Waterhouse Executive Search Group. She can be reached at barb@legacybowes.com

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